Amazon’s “Important Kindle request” for KDP authors
I received an e-mail from Amazon, which I am reproducing below. My understanding is that is generally acceptable to distribute an e-mail you received, unless it is marked private or tells you not to distribute it. I don’t think Amazon will mind in this case, since they’ve also publicly published it. I’m going to let you see it without any commentary from me. If you have comments about it yourself, please feel free to let me and my readers know by commenting on this post. I may respond to those or write more about this later, but I didn’t want to prejudice you about it before you had read it.
Update: I’ve gotten some good comments on this, and I see it is getting a lot of coverage in the blogosphere. I am going to add my opinion about it to this post, after the communication from Amazon. That will still give you a chance to read it first.
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Dear KDP Author,
Just ahead of World War II, there was a radical invention that shook the
foundations of book publishing. It was the paperback book. This was a time when movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 25 cents – it was ten times cheaper. Readers loved the paperback and millions of copies were sold in just the first year.
With it being so inexpensive and with so many more people able to afford to buy and read books, you would think the literary establishment of the day would have celebrated the invention of the paperback, yes? Nope. Instead, they dug in and circled the wagons. They believed low cost paperbacks would destroy literary culture and harm the industry (not to mention their own bank accounts). Many bookstores refused to stock them, and the early paperback publishers had to use unconventional methods of distribution – places like newsstands and drugstores. The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.” Yes, George Orwell was suggesting collusion.
Well… history doesn’t repeat itself, but it does rhyme.
Fast forward to today, and it’s the e-book’s turn to be opposed by the literary establishment. Amazon and Hachette – a big US publisher and part of a $10 billion media conglomerate – are in the middle of a business dispute about e-books. We want lower e-book prices. Hachette does not. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market – e-books cannot be resold as used books. E-books can and should be less expensive.
Perhaps channeling Orwell’s decades old suggestion, Hachette has already been caught illegally colluding with its competitors to raise e-book prices. So far those parties have paid $166 million in penalties and restitution. Colluding with its competitors to raise prices wasn’t only illegal, it was also highly disrespectful to Hachette’s readers.
The fact is many established incumbents in the industry have taken the position that lower e-book prices will “devalue books” and hurt “Arts and Letters.” They’re wrong. Just as paperbacks did not destroy book culture despite being ten times cheaper, neither will e-books. On the contrary, paperbacks ended up rejuvenating the book industry and making it stronger. The same will happen with e-books.
Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.
Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.
But when a thing has been done a certain way for a long time, resisting change can be a reflexive instinct, and the powerful interests of the status quo are hard to move. It was never in George Orwell’s interest to suppress paperback books – he was wrong about that.
And despite what some would have you believe, authors are not united on this issue. When the Authors Guild recently wrote on this, they titled their post: “Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to this post are worth a read). A petition started by another group of authors and aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered over 7,600 signatures. And there are myriad articles and posts, by authors and readers alike, supporting us in our effort to keep prices low and build a healthy reading culture. Author David Gaughran’s recent interview is another piece worth reading.
We recognize that writers reasonably want to be left out of a dispute between large companies. Some have suggested that we “just talk.” We tried that. Hachette spent three months stonewalling and only grudgingly began to even acknowledge our concerns when we took action to reduce sales of their titles in our store. Since then Amazon has made three separate offers to Hachette to take authors out of the middle. We first suggested that we (Amazon and Hachette) jointly make author royalties whole during the term of the dispute. Then we suggested that authors receive 100% of all sales of their titles until this dispute is resolved. Then we suggested that we would return to normal business operations if Amazon and Hachette’s normal share of revenue went to a literacy charity. But Hachette, and their parent company Lagardere, have quickly and repeatedly dismissed these offers even though e-books represent 1% of their revenues and they could easily agree to do so. They believe they get leverage from keeping their authors in the middle.
We will never give up our fight for reasonable e-book prices. We know making books more affordable is good for book culture. We’d like your help. Please email Hachette and copy us.
Hachette CEO, Michael Pietsch: Michael.Pietsch@hbgusa.com
Copy us at: readers-united@amazon.com
Please consider including these points:
– We have noted your illegal collusion. Please stop working so hard to
overcharge for ebooks. They can and should be less expensive.
– Lowering e-book prices will help – not hurt – the reading culture, just like
paperbacks did.
– Stop using your authors as leverage and accept one of Amazon’s offers to take them out of the middle.
– Especially if you’re an author yourself: Remind them that authors are not
united on this issue.
Thanks for your support.
The Amazon Books Team
P.S. You can also find this letter at www.readersunited.com
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Update: after seeing some comments from my readers, and being directly asked what I thought about it, I’ve decided to add my opinion and analysis to this post.
I suspect some of you will be at this blog for the first time because of linkages to other sites, so let me set up a little bit about what might affect my opinions.
I am a former brick-and-mortar bookstore manager, which might tend to align me with the retailer in this case, Amazon. However, a lot of brick-and-mortar folks don’t like Amazon, so that might dilute that impact. I am also an author of books which are published through Amazon’s Kindle Direct Publishing, and so have made money from Amazon. This blog, as well, is one of the top-selling blogs of any kind in the USA Kindle store: another thing that might make me lean towards Amazon.
Also important: I’m a very happy Amazon customer, and use a Fire Phone, Fire TV, Kindle Fire HDX, and Kindle Paperwhite daily. I’ve had a very good relationship with Amazon.
I’m also a publisher, which might make me sympathetic to Hachette. That’s in a small way: I’ve only published my own work, not counting public domain books I’ve digitized for a non-profit.
I believe I can give you a fair analysis, regardless of those factors.
As to my overall opinion on the situation: Amazon shouldn’t pretend to carry the books. Either carry them, or don’t. If you can’t reach a satisfactory agreement with Hachette, drop the books. I think Amazon is seriously hurting their relationships with customers by having product pages for books, and then making getting them difficult or impossible. Customers will project that to all of your products, they won’t really care about the reason…and they will feel like pawns you are willing to hurt in the game.
I’d like to see the two sides settle, and have things get back to where they were. That’s my ideal outcome. If that doesn’t happen, I’d be happier with the Hachette books out of the store than in the store with barbed wire around them.
Now, as to Amazon’s e-mail:
It appears to me to be designed to lead people to an emotional conclusion, and one can certainly argue that it is designed to mislead them.
The first part is particularly bizarre, where they talk about the history of paperbacks. This is where Amazon is sticking to its positioning as being populist (using the word “nope” is another indicator of that) and against the establishment, and in doing so, it’s conflating things.
Let me restate what they said about the paperbacks, and which they then use to make Hachette the big bad (as part of the establishment):
Publishers produced a new cheaper version of books. Many retailers refused to carry them. An author opposed them.
See? When you restate it, the publishers were the good guys for readers, and the retailers were the bad guys… and “famous” authors were bad, too!
- Publishers = Hachette = Good Guys
- Retailers = Amazon = Bad Guys
- “famous author” = everybody who signed a recent letter against Amazon’s tactics = Bad Guy Sympathizers
Isn’t that the opposite of what Amazon wants you to think?
That third bullet point is especially interesting because they addressed this e-mail to authors! It seems like they want to create a firm schism between traditionally published famous authors, and indies (independent authors).
The reference to Orwell is fascinating, because they then do a sort of Orwellian Nineteen Eight-Four “newspeak” to somehow make that an argument in the current situation in favor of a retailer versus a publisher.
The next thing, which sparked comments on this post, was the assertion that “Many e-books are being released at $14.99 and even $19.99”, which people naturally took to suggest that Hachette was making people pay $19.99 for a novel.
Amazon typically discounts books from the publisher’s suggested price (the DLP or Digital List Price), so it isn’t that easy to use pricing numbers at Amazon to determine how many books are being released at a certain price point. Looking at the analysis in my monthly Snapshot for August 1st, 2014, there are very few books (in terms of percentage of the store) at the price points I check between $19.99 and $24.99:
$ 19.99 | 7,239 | 0.27%
$ 20.99 | 717 | 0.03%
$ 21.99 | 744 | 0.03%
$ 22.99 | 2,679 | 0.10%
$ 23.99 | 960 | 0.04%
$ 24.99 | 915 | 0.03%
I doubt that one percent of the e-books have a DLP of $19.99.
I did a search for
$19.99 or higher e-books from Grand Central in the USA Kindle store (at AmazonSmile: benefit a non-profit of your choice by shopping*)
Grand Central is one of Hachette’s big imprints. My results?
Five titles: two omnibus (more than one book is included) titles, two cookbooks, and a “coffee table book”. No single novels.
My readers’ comments not surprisingly indicated a reluctance to pay $19.99 to Hachette, presumably for a single novel.
They aren’t asking us to do that.
The price you pay is up to Amazon, not Hachette. Part of the dispute with the publishers (which led to the publishers having to settle with U.S. Department of Justice over accusations of collusion to raise e-book prices) had to do with Amazon selling e-books at a loss. If Hachette did price a book at $19.99, Amazon could still sell it to you for $9.99. Amazon would take a bigger loss that way, which I’m sure they’d rather not do.
Amazon can take (and apparently has taken) a loss on many e-books. If good prices on e-books get you into Amazon’s ecosystem, which then gets you to become a Prime member where you’ll buy much higher margin physical goods (what I refer to as “diapers and windshield wipers”), then it is well worth it.
Hachette can not set the price you pay for a book through Amazon: that’s part of what the problem was with the Agency Model, where they were able to do that.
Another disingenuous thing in the e-mail, in my opinion, is Amazon’s numbers on how many more books an e-book sells at $9.99 than at $14.99.
They conveniently leave off the likelihood that the discrepancy is due in some part to the book being cheaper than other comparable books, not just to $9.99 as a discrete value.
Here’s what I mean:
If some books are $14.99 and some are $9.99, the $9.99 appears to be more attractive…people will see it as “saving five dollars”.
If almost all books were $9.99, that “comparison positive” disappears. Maybe then the 1.74 multiplier would apply to books at $7.99 versus books at $9.99, although I doubt it would be that high. I do think there is a psychological impact with books priced under $10 versus $10 or higher (we certainly saw that in my store), but I think the 1.74 multiplier wouldn’t be reliable if all books came down in price.
Again, these are observations of the e-mail, not of the position. I think the e-mail, which they knew would be seen by readers in addition to the authors/small publishers to which it was sent (Amazon posted it themselves at “Readers United” ((which has an e-mail address at Amazon.com)), and in fact, addressed it to readers rather than authors at that site) to manipulate readers and authors into pressuring Hachette.
That’s the part I don’t like.
To reiterate, I think Amazon’s Kindle has been wonderful for book culture. I think more people are reading books, including the classics, because of it. I think books are more accessible, and are able to be published by more people giving us a greater variety.
Here’s my best guess for the future:
- Authors will increasingly control the distribution of their books, not needing the tradpubs’ “machinery” to get a book out there, both in terms of distribution and discovery. We’ll see more brand name authors independently publishing some of their work. It’s possible that an author collective might be part of it. Indie authors will see a relatively golden age, in the beginning
- Tradpubs will figure out alternate distribution channels, although they won’t be as effective as Amazon is right now. Some of that will be direct selling from the publisher to the reader…they have to solve the discovery issue first. I think it will be a mix, with some tradpub titles at Amazon, some through other channels. I’ve mentioned that I think we might see “ancillary” and non-canonical works in Kindle Unlimited from the tradpubs (short story prequels, sequels, and sidequels ((a term I use for works set in the same universe, but not in sequence or focusing on the same characters)), reference works, and so on), and the main series (which requires less discovery) sold through alternate channels
- Amazon will do fine. I wrote recently about how they could improve contextual linking, but Amazon will continue to make it easier for us to buy books. The books are not going to be their profit drivers, but I expect them to be part of the strategy
- Readers will benefit from these changes. We’ll have more books for less money
As requested, now you have my opinion and analysis. I look forward to more of your comments on this issue.
Update: I’ve flipped several articles about this into the free ILMK Flipboard magazine, but I thought I’d link to a couple of the stand-outs here:
- IN WHICH AMAZON CALLS YOU TO DEFEND THE REALM by Chuck Wendig: I have to warn you about this one first, because the “F word” shows up right away. That’s always an interesting choice: while it may more accurately reflect the way you speak and feel, it considerably limits your audience. That said, I thought this was a hilarious take on the Amazon e-mail, and the Hachazon War generally
- Dispute Between Amazon and Hachette Takes an Orwellian Turn by David Streitfeld in The New York Times: I hadn’t researched the quotation Amazon uses to say that, “…famous author(s)…” “…are “wrong about that” (seemingly trying to equate George Orwell with established authors like Stephen King who recently signed a letter to Amazon decrying the e-tailer’s tactics). Streitfeld does a very nice job of explaining the context of the quotation, and how Orwell actually supported cheap paperbacks. There was no need to rush this e-mail out, as far as I know, and it appears to have come from an official Amazon source (although some have found it so strange, they wonder if Amazon was hacked). Presumably, they had time to actually research the quotation, and chose to use it in a way which the author would probably not have intended. According to Streitfeld, the original quotation is, “The Penguin Books are splendid value for sixpence, so splendid that if the other publishers had any sense they would combine against them and suppress them.”
Join hundreds of readers and try the free ILMK magazine at Flipboard!
* I am linking to the same thing at the regular Amazon site, and at AmazonSmile. When you shop at AmazonSmile, half a percent of your purchase price on eligible items goes to a non-profit you choose. It will feel just like shopping at Amazon: you’ll be using your same account. The one thing for you that is different is that you pick a non-profit the first time you go (which you can change whenever you want)…and the good feeling you’ll get. 
Shop ’til you help!
This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.
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